RESEARCH AND DEVELOPMENT STRATEGY

Amgen aspires to be the best human therapeutics company. Achieving this goal starts with building the world's premier R&D organization. Amgen's R&D Guiding Principles were inspired by this pursuit and designed to reinforce our strategic priorities.

Focus on innovative medicines for unmet needs in patients with serious illnesses. While Amgen is always pursuing new opportunities and adapting to challenges, we retain an enduring commitment to the same mission. That mission is to enhance and extend the lives of patients facing serious illness.

Pursue targets that are validated in humans. We believe we are on the threshold of a revolution in science in which population genetics will help to reveal new targets that clearly drive disease risk in humans. By focusing on targets supported by human genetics or other strong human evidence, we aim to increase our clinical success rates, reduce development timelines, and lower the cost of delivering new medicines to patients.

Maintain multiple drug modalities with a focus on biologics. Amgen pursues a "biology-first" approach to drug discovery. We strive to select drug targets based on a deep understanding of disease biology, and then choose the drug modality, or structural template, best suited to the target. We recognise our strength in biologics and the higher clinical success rates for biologic medicines. We also maintain a broad toolkit of modalities, including small molecules, in order to have the right tool for any target we pursue.

Focus on return on investment and operational efficiency. To maximise the value of Amgen's R&D investment, we focus resources on programs that offer a large effect size and more likelihood of success. We maximize the value of lower-priority assets by partnering and out-licensing. Amgen also strives to continually identify operational efficiencies, such as reduced cycle times, leaner clinical trials, and centralised monitoring of clinical study sites.

Harness external innovation. At Amgen, we pursue great innovation wherever we can find it, and roughly half of our current late-stage pipeline comes from collaborations or acquisitions. We appreciate the synergy between in-house and external innovation: To identify and add value to the best external inventions, we need to maintain a high level of in-house scientific talent and capabilities.

Demonstrate the value of our medicines. Patients will not benefit from medicines they cannot access, and increasingly, access depends on meeting evolving standards from regulators and payers. To meet these expectations, we strive to deliver major therapeutic advances—medicines that offer compelling benefits for patients and sound health economics for society.

Many companies in our industry have pursued a strategy known as "Shots on Goal," where the aim is to maximize the number of molecules in drug pipelines to raise the odds that at least a few will prove successful. This approach is designed to address our still limited knowledge of human biology, but in practice it often leads to higher drug development costs and low productivity.

Amgen's strategy is to rely instead on our scientific leaders to "Pick the Winners" by identifying and expediting highly promising programs. Toward that end, we prioritise programs based on targets that have been validated in humans, primarily through genetic research that shows a target's clear influence on disease risk. For example, genetic studies uncovered the link between PCSK9 and cholesterol homeostasis, and similar research revealed sclerostin's important role in regulating bone growth. Our subsidiary, deCODE Genetics, gives Amgen new strength in population genetics, positioning us to lead the unfolding revolution in gene-based target discovery.

While this strategy does not guarantee that each designated program will prove successful, we are confident that it will increase the overall rate of success for Amgen's clinical trials, accelerate drug development timelines, reduce costs, and improve returns on our R&D investment.

When we find ourselves with more programs than we can deliver for patients with our own resources, we are moving more aggressively to partner or out-license these surplus assets. The resulting agreements provide revenues that can be used to support key programs in our pipeline, and they serve the interests of patients by ensuring that more potential drugs get developed.

We are also active in our pursuit of external innovation that can complement our internal capabilities and programs. This willingness to embrace innovation wherever we can find it is exemplified by our acquisitions of deCODE Genetics, Micromet, KAI Pharmaceuticals, and Onyx Pharmaceuticals.

At a time when technological breakthroughs are revolutionising how drugs are discovered, Amgen's strategy aims to fully exploit the emerging opportunities. We have made aggressive investments in gene-based discovery and new therapeutic platforms, and we've focused on diseases where our science supports the potential for major advancements.

In recent years, ultra-high-throughput DNA sequencing has accelerated the search for genetic variants that are strongly linked to disease risk. Through our acquisition of deCODE Genetics, Amgen is advancing an early-stage pipeline based on newly discovered genes with exciting potential. This strategy builds upon Amgen's record of turning genetic insights into new medicines. Seven Amgen therapies approved for use in patients can be traced back to genes first cloned in our own labs.

To successfully pursue new targets emerging from genetics, we benefit greatly from Amgen core strengths in biology and protein engineering. Newly discovered disease genes may code for proteins with unknown functions, and these novel proteins may also prove very hard to engage with standard types of drugs. To interdict challenging targets, we need to elucidate complex biology before choosing the best drug modality from our toolkit—or engineering a new modality.

To sharpen our focus on cancer treatments that work by enlisting the body's immune defenses, we have merged our Discovery Research oncology and inflammation groups into a single organisation. This consolidation aims to take full advantage of Amgen's immuno-oncology platforms, including our novel BiTE^®antibody constructs—bispecific T cell engagers—as well as our oncolytic immunotherapy.

In all our Discovery Research programs, we have raised the bar in terms of the level of differentiation we expect from Amgen therapies. Our goal is to deliver new treatments that offer clear benefits and large effects, such as long-term survival in cancer or prevention of migraines or severe asthma attacks.

At Amgen, we believe drug discovery starts with a deep understanding of biology. This understanding guides the critical choice of which disease target to pursue, and it also allows us to choose the right tool for that target—the modality, or structural template, most likely to optimise efficacy and safety.

Amgen has one of the industry's most expansive modality toolkits. It encompasses small molecules, which can be made using chemistry; intermediate-sized molecules like peptides; and large biologic molecules, such as antibodies and other types of therapeutic proteins. Amgen's product portfolio and pipeline also includes many novel modalities, such as peptibodies, BiTE^® antibody constructs, and other bispecific molecules, antibody-drug conjugates, and oncolytic immunotherapy.

Moreover, Amgen has integrated this broad modality platform into a single drug discovery organization. We have broken down the silos that typically separate small, medium, and large molecule scientists to enhance teamwork and create cross-fertilization among diverse skill sets. Our goal is to ensure a "Biology First" approach to discovery by eliminating stand-alone groups that look at disease through the lens of a single drug modality.

Where good choices exist between different forms of medicines, we recognize Amgen's deep expertise in biologics development and manufacturing. Biologics also tend to have higher success rates in clinical development. However, we estimate that roughly two-thirds of drug targets can't be accessed by large molecules, so Amgen maintains a strong expertise in small molecule drug discovery and development.

In addition to ensuring that Amgen's investment decisions are based on compelling science, we are reengineering our processes to operate more efficiently. This ongoing effort aims to improve our success rates and cycle times while lowering costs, enabling us to deliver more new medicines from our investment in R&D.

In pursuit of this goal, Amgen is building a culture of continuous improvement, supported by a range of actions designed to increase our overall productivity. For example,

• We have trimmed our project portfolio to eliminate research programs that are less likely to offer patients significant benefits over other available treatments.

• To reduce the cost and complexity of our network of research sites, we have consolidated more scientists in the research hubs of Cambridge, Massachusetts, and South San Francisco, California.

• Through a fast-to-patient approach for producing monoclonal antibodies, we are cutting by up to a year the time needed to get these potential therapies into the clinic.

Amgen is also designing leaner clinical trial programs through streamlined protocols, centralised monitoring of clinical sites, risk-based quality control, and careful management of clinical supplies. By 2018, we expect these efforts and other process improvements to cut the cost of our clinical trials significantly while trimming the average duration of Amgen's clinical programs by six months.